Monday, October 26, 2015

Valeant stock takes a beating after drug price increases

Not unrelated to the controversy related to Turning Pharma, Valeant was under scrutiny in a post
on Reuters Drugmaker Valeant raises detailed defense but doubts remain

Text on Wikipedia summarizes the recent problems:

Much of the criticism relates to price increases Valeant has made to drugs it acquired the rights to through mergers and acquisitions.[66] For instance, following the company's acquisition of Salix Pharmaceuticals in 2015, it raised the price of one Salix drug, the diabetes pill Glumetza, about 800 percent.[66] The price of Valeant's stocks sank following the scathing New York Times article about Valeant's business model which enriches investors by overpricing life-saving drugs. Regulators are investigating the controversial model.[15]

The article described how,[66]

"Valeant is known for buying companies and laying off their employees to achieve savings, while accumulating a debt of about $30 billion. It spends an amount equivalent to only 3 percent of its sales on research and development, which it views as risky and inefficient compared with buying existing drugs. Traditional big drug companies spend 15 to 20 percent of sales on research and development. Valeant also pays extremely low taxes because it is officially based in Canada, although Mr. Pearson operates from New Jersey."

— New York Times 4 October 2015

On October 5, 2015 Valeant closed sharply dropping $26.52 to $213.10 CAD.[4] Demetris Afxentiou argued in an article published in The Motley Fool that a "single tweet from Democratic presidential candidate Hillary Clinton" sparked a sell-off of Valeant stocks.[67] Clinton's September 21st, 2015 tweet, aimed at price gouging in specialty drugs, posted on social media, "Price gouging like this in the specialty drug market is outrageous. Tomorrow I’ll lay out a plan to take it on."[68] Neither Clinton's Tweet, nor the New York Times article[16] linked in her Tweet focused on Valeant. They referred to Turing Pharmaceuticals' Daraprim, a 62-year-old drug whose price increased from $13.50 each to $750. However "Valeant’s heart drugs Nitropress and Isuprel increased in price by over 210% and 520% each the day that Valeant acquired the rights to sell them."[67] A few after Clinton's tweet, Valeant lost nearly 20%, "a significant portion of its value

link to Wikipedia:

Now, if a politician sold short on a pharma stock, and then criticized the pharma the next day, is that any different from
the Kyle Bass IPR strategy?


Post a Comment

<< Home